Public and Private Crypto Keys

With extensive experience as an electrical/software/coding engineer along with having a diverse financial background, Thomas Wettermann’s areas of interest include Machine Learning (ML), artificial intelligence (AI), and Financial Technology (FinTech). For the past few years, Thomas Wettermann has focused on the underlying technologies that support and promote all phases of cryptocurrency, Web 3.0, and metaverse ecosystems.

Public and Private Crypto Keys (source: ledger.com)

How do Public and Private Keys Control Cryptocurrency Transactions?

When crypto is purchased, you do not possess any type of physical coin. Rather, crypto is a digital representation of a store of value that resides on a computerized ledger called a blockchain. And ownership of this crypto requires proof of both a public key and a private key. All cryptocurrencies have both a public key and a private key.

Owners of crypto can send and receive their digital currencies without requiring any type of third party like a bank or trustee to verify the transactions.

Rather, it is these keys that allow for crypto to be sent to any third party, anywhere in the world, at any time of day. The public and private keys work together as a key pair. Public keys can be shared with others to enable the receipt of transactions.

However, private keys must be kept secret. If anyone has access to these private keys, they will also have unfettered access to any cryptocurrency associated with those keys.

The public key allows one to receive cryptocurrency transactions. Public keys represent a cryptographic code that is paired to the private key. Having the public key allows that person to send transactions to the private key. Importantly, however, it is the private key that is required to “unlock” these transactions to prove the rightful owner of the crypto.

Therefore, crypto owners can be free to share their public key as this allows any third parties to send these owners transactions. However, crypto owners must be extremely mindful not to entrust anyone with the private key.

Private keys are maintained in a cryptocurrency wallet. As will be explained, such a wallet can be mobile or desktop software or a specialized hardware device. Private keys do not reside on the blockchain network. When cryptocurrencies are maintained on an exchange like Coinbase or Gemini, the exchange will be the custodian of the private keys.

If crypto is transferred from an exchange to a non-custodial wallet, then the owner of the wallet is in control of the private keys. The choice of “holding your own keys” or entrusting a custodian to hold these keys depends on your philosophy, risk tolerance, and a host of other factors.

All the views expressed on this site are those of Thomas Wettermann and do not represent the opinions of any entity with which Thomas Wettermann has been, is currently, or will be affiliated.

Trading digital financial assets such as cryptocurrencies can carry a high level of risk, and may not be suitable for all investors. Before deciding to invest, purchase, and/or trade cryptocurrency you should carefully consider your investment objectives, level of experience, adversity to risk, and volatilities. The possibility exists that you may sustain a loss of some or all of your initial investment; therefore, you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with cryptocurrency trading, and seek advice from a qualified and independent financial advisor.

Thomas Wettermann is not an independent financial advisor. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as a general market commentary of Thomas Wettermann and does not constitute investment advice. Thomas Wettermann will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. All opinions expressed on this site are owned by Thomas Wettermann and should never be considered as advice in any form.